New State Laws and the Importance of Timely FROI

There are many strategies that a staffing firm can employ to reduce workers’ compensation claim costs. One simple strategy that may be overlooked is to promptly report workers’ compensation claims, ideally within 24 hours of the incident occurring.

The delay from the time a workers’ compensation incident occurs to the time a First Report of Injury (FROI) is made to the employer’s insurance carrier, otherwise known as lag time, has a dramatic impact on both the course and cost of the claim. Lag time can impact the following aspects of a claim:

Medical treatment soughtThe course of treatment for an injury varies based on the length of time passed from when the injury was sustained. For example, a laceration may become infected with a delay in treatment, or a surgical repair of a tendon tear may no longer be possible. Complications from delays in seeking medical treatment or a claims adjuster’s recommendation of an appropriate and cost-effective method of treatment can increase both medical payments and amounts paid for disability ratings.

Ability to deny a claimMany states require that in order for an insurance carrier to deny a fraudulent claim, that denial must take place within a certain number of days of the alleged incident. If a FROI is delayed, an insurance carrier may miss the window and be forced to make payments on a claim that should have been denied.

Fines & penalties assessedStates also have imposed fines and penalties associated with lag time. In some cases, those are fines and penalties for the delayed FROI, and in others, the payouts required on the claim are actually higher than would otherwise be mandated by the state as a penalty for the late reporting.

Claimant cooperationWhen an employee is injured at work, their cooperation in a smooth return to work can be impacted by how the claim process is managed. If the employee is waiting on medical treatment, bills to be paid or lost time payments because of a delayed FROI, they may be less likely to cooperate with light duty assignments or treatment recommendations and more likely to engage an attorney. Speaking of…

Likelihood of attorney involvementA study released in May 2015 by the National Council on Compensation Insurance found the likelihood of a claimant involving an attorney increases as lag time increases, with claims reported with no lag time involving attorneys 12.8% of the time; 31.7% of claims reported with lag time in excess of four weeks had attorney involvement.

Time to reach closureThe same NCCI study found the closure ratio of claims was also affected by lag time. 69.4% of claims reported within the first week after the incident were closed within 18 months of the report date. That percentage decreases to 53.5% for claims with a lag time in excess of four weeks.

Overall cost of a claimMost importantly, the study found the overall cost incurred per claim was greatly impacted by lag time. Median cost for claims reported with lag time in excess of four weeks was found to be 39% higher than the median claim cost for claims reported within the first week after injury.

While, ideally, all claims should be reported within 24 hours of the incident to best control your costs, staffing firms should also ensure they know the reporting requirements and potential repercussions specific to the states they operate in.

For example, staffing firms operating in New York should be aware that effective January 1, 2016, the New York State Workers’ Compensation Board (WCB) can assess financial penalties if an insurance carrier does not file the FROI with the state within 18 days of the incident, or 10 days after the employer received notice of the incident, whichever is greater. New York State WCB will also be rolling out further penalties in 2016 for failure to make a timely compensability decision, file a timely controversy, or make a timely payment.

If looking to keep current on changing requirements, contact your broker or the Assurance ‘A’ Team.

Kerri Quigley is a Vice President who specializes in the staffing industry. With over 10 years of insurance experience, Kerri has solidified her expertise in providing in-depth coverage analysis, including the reconstruction of staffing industry products with Philadelphia, AIG, CNA and Hanover Insurance. Her extensive knowledge of the industry is further augmented through various speaking and teaching opportunities. Kerri earned a Bachelor of Arts degree in Computer Science from the University of California, San Diego. She's a member of the American Staffing Association and New Jersey Staffing Alliance. Kerri also obtained a number of insurance designations, including Chartered Property Casualty Underwriter (CPCU), Associate in Risk Management (ARM) and Associate in Commercial Underwriting (AU), among others. In 2017, Kerri was named an Elite Woman in Insurance by Insurance Business America.